Birmingham-area gas prices surging at time when typically they fall

Prices at the pump have gotten downright spooky around Birmingham, climbing 28 cents a gallon in a month after rising daily at a time of the year when gasoline costs usually fall.

A 25 percent spike in the price of crude oil since mid-September is mostly to blame for the surprise advance, said Peter Clark, a University of Alabama chemical engineering professor who follows the energy markets.

"Crude oil accounts for 40 to 50 percent of the price of gasoline, so naturally the cost of filling up is rising," he said Wednesday.

A survey by AAA, the motoring club, shows that a gallon of regular gas in metro Birmingham averaged $2.54 Wednesday, up 10 cents in a week. A month ago, when crude was cheaper, regular averaged $2.26.

At some area stations, gas prices are substantially higher than AAA's average, according to prices posted by motorists on Birminghamgasprices.com. The highest price listed was at a Texaco station on Clairmont Avenue in Birmingham -- $2.66 a gallon for regular.

"This is definitely unusual, as gas prices tend to decline in the fall and rise in the spring before peaking in the summer," said Clay Ingram, a spokesman for AAA Alabama.

The spike has caught many motorists offguard and triggered fears that pump prices will continue to rise. Some drivers at gasoline stations on U.S. 280 on Wednesday said they fear prices soon will return to the $3-a-gallon range.

"I wouldn't be surprised, considering how fast they've gone up over the past couple of weeks," Bill Baker said while filling up his Honda Accord at a Shell station where regular was selling for $2.56 a gallon.

Crude above $77

Crude oil futures traded above $77 a barrel on the New York Mercantile Exchange, despite a drop of nearly $2.50 after a government report showed an unexpected increase in supplies.

Crude is traded around the world in U.S. dollars, which have fallen in value substantially this year compared with some other currencies. That has attracted foreign investors who see opportunities to buy oil on the cheap as the global economy shows signs of improvement.

"What we are seeing now is a return to foreign investors buying up oil, as the weak U.S. dollar has made it more valuable all over the world," AAA's Ingram said. "There is a lot of optimism in the world economy. As things start to improve, people start spending money and companies start hiring again, that will increase demand for gasoline and affect prices at the pump."

Still, Ingram said he doubts regular gas will approach $3 a gallon again this year, noting prices never hit that level during the peak summer travel season. Regular gas in metro Birmingham topped out around $2.53 a gallon in mid-June, according to the AAA survey.

"I think we're close to starting to level off again as we normally see this time of the year," he said. "We are nearing a plateau and hopefully things will get better soon."

Clark doesn't see gas prices moving substantially higher. Although crude oil roughly has doubled since falling below $40 a barrel in the spring, he doubts crude will approach the record $147 a barrel seen in July 2007. That sent gas prices up to around $4 a gallon.

"I think $100 (a barrel) is a possibility again, but it depends on a lot of factors including how soon we get out of this recession," Clark said.